Centre Labels Kerala as One of the Most Financially Unhealthy States Amid Dispute

Centre Brands Kerala as Financially Unhealthy Amid Fiscal Dispute

The ongoing tussle between the Centre and Kerala government over fiscal management has ignited discussions on financial health, resource allocation, and federal governance.

Financial Mismanagement in Kerala:

  • Precarious Fiscal Health: The Centre criticizes Kerala’s fiscal condition, citing inadequate management of public finances.
  • Continued Financial Stress: Despite significant financial aid from the Centre, Kerala grapples with financial strain.
  • Allegations of Mismanagement: Kerala accused of reckless borrowing, funding unproductive expenditure, and poorly targeted subsidies.
Image Credit: Onmanorama

Data Insights:

  • Rising Liabilities: Kerala’s outstanding liabilities as a percentage of GSDP have surged from 31% in 2018-19 to 39% in 2021-22, surpassing the national average.
  • Implications of High Liabilities: Elevated liabilities lead to increased interest payments, widening fiscal deficits, and potential debt traps.
  • Increased Committed Expenditure: Kerala’s committed expenditure as a percentage of revenue receipts has soared, limiting productive government spending.

Kerala’s Defence:

  • Asserting Fiscal Autonomy: Kerala defends its rights under the federal system to regulate finances independently.
  • Economic Concerns: Centre’s actions, like imposing borrowing ceilings, threaten Kerala’s economic stability and developmental goals.

Also read: Tax-to-GDP Ratio Set to Reach Record High of 11.7% in FY25

Legal Response:

  • Court Proceedings: Kerala initiates legal battle against Centre’s alleged interference in state finances.
  • Protection of Federalism: Kerala seeks judicial intervention to safeguard fiscal autonomy and budgetary decisions.


  • National Ramifications: Dispute impacts broader fiscal federalism and intergovernmental relations.
  • Developmental Concerns: Prolonged legal battle could hinder Kerala’s development agenda and worsen financial strains.


The Centre-State fiscal dispute highlights complexities in federal governance and fiscal management. Resolution will define fiscal autonomy within India’s federal structure.

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